Hawker Beechcraft has filed for Chapter 11 bankruptcy protection.
In a statement, the planemaker said it has reached an agreement with "a significant number of its senior secured lenders and senior bondholders on the terms of a financial restructuring plan."
Hawker Beechcraft said the filing and subsequent restructuring will elminate $2.5 billion in debt and approximately $125 million of annual cash interest expenses.
“We are pleased to have reached an agreement with our largest lenders and bondholders on a solution to stabilize and improve our capital structure," CEO Robert S. Miller said in the statement.
"In the last three years, the company has made aggressive transformational changes in all operational functions, and today’s announcement represents the next step forward. Restructuring our balance sheet and recapitalizing the company in partnership with our debtholders will dramatically improve Hawker Beechcraft’s ability to compete in a rapidly changing environment.”
The terms of the pre-arranged restructuring agreement will take effect when the company’s reorganization plan is confirmed by the U.S. Bankruptcy Court for the Southern District of New York and the Chapter 11 case is concluded.
Hawker Beechcraft is owned by Goldman Sachs Group Inc's private equity arm and Onex Corporation.
“Today is a difficult day for the employees of Hawker Beechcraft and the Wichita community," said Rep. Mike Pompeo (R-KS). "While I expect that Beechcraft will emerge from bankruptcy stronger than ever, this process will no doubt be challenging for Hawker’s suppliers, employees and their families."
The sentiment was echoed by Gov. Sam Brownback (R-KS). “Hawker Beechcraft has a long and significant history in Wichita and is a critical part of our state’s aerospace cluster. Preserving jobs in Wichita and safeguarding the state’s investment are our priorities. We will be working closely with the company’s leaders during this restructuring process.”
Chapter 11 refers to the section of U.S. law that allows a company to continue normal day-to-day operations while it develops a plan to reorganize.
As part of the prearranged restructuring, Hawker Beechcraft obtained a commitment for $400 million in Debtor-in-Possession (DIP) financing, which will enable it to continue paying employees, suppliers, vendors and others in the normal course of business.
“As we have worked to develop this long-term plan to recapitalize the company and strongly position Hawker Beechcraft for the future, our employees have continued to build the best airplanes in the world and provide our owners with the most comprehensive global customer support in the industry. The protections provided by the U.S. Bankruptcy Code and the financing commitment we have obtained put Hawker Beechcraft in a great position to continue to do so throughout the restructuring process," said Miller.
Many companies have filed for Chapter 11. American Airlines is currently in Chapter 11. Other airlines, including Delta and United have undergone reorganization to cut costs and restructure.
Chapter 11 is different than Chapter 7. In a Chapter 7 bankruptcy, a company ceases all operations and assets are sold off.